ICMAP Managerial Level cheat sheet

Accounting equation: Assets = Liabilities + Equity; every transaction preserves the balance.

Accrual basis records revenue when earned and expenses when incurred, regardless of cash timing.

Depreciation methods: straight-line = (cost − residual)/useful life; reducing balance applies a fixed rate to carrying amount.

IFRS conceptual framework qualitative characteristics: relevance and faithful representation are fundamental; comparability, verifiability, timeliness, understandability are enhancing.

Revenue recognition (IFRS 15) five steps: identify contract, identify performance obligations, determine transaction price, allocate price, recognise on satisfaction.

Inventory cost under IAS 2 is lower of cost and net realisable value; FIFO and weighted average are permitted, LIFO is not.

Goodwill arises only on business combination and is not amortised under IFRS; it is tested annually for impairment.

Current ratio = current assets/current liabilities; quick ratio excludes inventory from current assets.

A provision is recognised when a present obligation exists, outflow is probable, and the amount can be reliably estimated.

Contribution margin = sales − variable costs; contribution per unit = selling price − variable cost per unit.

Break-even units = fixed costs / contribution per unit; break-even revenue = fixed costs / contribution margin ratio.

Margin of safety = (budgeted sales − break-even sales) / budgeted sales, expressed as a percentage.

High-low method: variable cost per unit = (cost at high activity − cost at low activity) / (high units − low units).

Overhead absorption rate = budgeted overhead / budgeted activity base (labour hours, machine hours, or units).

Under- or over-absorption = actual overhead incurred − overhead absorbed; under-absorbed when actual exceeds absorbed.

Standard costing variances: material price = (standard price − actual price) × actual quantity purchased.

Relevant costs are future, incremental cash flows; sunk costs and allocated common fixed costs are irrelevant.

Activity-based costing assigns overhead to cost pools driven by activities, improving accuracy where products differ in complexity.

Separate legal personality: a company is a distinct legal person; shareholders have limited liability up to unpaid share capital.

Piercing the corporate veil is exceptional, typically for fraud or where the company is a mere sham or agent.

Directors owe fiduciary duties: act in good faith, avoid conflicts of interest, exercise due care and skill, and not misuse company property.

Business judgment rule protects directors who act on an informed basis, in good faith, and in the honest belief of best interest of the company.

Agency: principal is bound by acts of an agent with actual or apparent authority; undisclosed principal may still be liable.

Insolvency tests: cash-flow test (ability to pay debts as they fall due) and balance-sheet test (assets exceed liabilities).

Audit committee should comprise independent non-executive directors; it oversees external audit, internal controls, and financial reporting.

Related-party transactions require disclosure and, where material, independent shareholder approval to prevent self-dealing.

Whistleblower protections and an independent internal audit function are core elements of an effective governance framework.

Taxable income = accounting profit adjusted for disallowed expenses and non-taxable income, less allowable deductions and losses.

Capital allowances replace accounting depreciation for tax; depreciation is added back and allowances deducted.

Tax shield of debt = interest expense × tax rate; it reduces the effective cost of debt.

After-tax cost of debt = pre-tax interest rate × (1 − tax rate).

Deferred tax arises on temporary differences between accounting carrying amount and tax base; IAS 12 uses the liability method.

Tax losses carried forward create a deferred tax asset only if future taxable profit is probable.

Transfer pricing rules require related-party transactions to be priced at arm's length.

Withholding tax applies to certain cross-border payments (dividends, interest, royalties) and may be reduced by tax treaties.

Tax avoidance uses legal arrangements to reduce tax; tax evasion is illegal and involves concealment or falsification.

Time value: PV = FV / (1 + r)^n; NPV = present value of cash inflows − initial investment.

NPV decision rule: accept projects with NPV > 0; IRR rule: accept when IRR exceeds the cost of capital.

WACC = (E/V) × Ke + (D/V) × Kd × (1 − t), using market value weights.

CAPM: Ke = Rf + β × (Rm − Rf); beta measures systematic risk.

Dividend growth model: Ke = (D1 / P0) + g, where g is the expected growth rate.

Working capital cycle = inventory days + receivable days − payable days.

Operating leverage rises with fixed costs; financial leverage rises with debt, increasing equity risk.

Modigliani-Miller without taxes: capital structure is irrelevant; with taxes, debt adds value through the tax shield.

Payback period ignores cash flows after payback and the time value of money; it measures liquidity and risk recovery.

Porter's five forces: rivalry, new entrants, substitutes, supplier power, buyer power; they shape industry profitability.

Porter's generic strategies: cost leadership, differentiation, and focus; being stuck in the middle erodes competitive advantage.

SWOT analysis maps internal strengths and weaknesses against external opportunities and threats.

BCG matrix: stars (high growth, high share), cash cows, question marks, and dogs, guiding resource allocation.

Ansoff matrix: market penetration, product development, market development, and diversification.

Value chain analysis separates primary and support activities to identify where cost or differentiation advantage is created.

Core competence is valuable, rare, hard to imitate, and non-substitutable (VRIN criteria).

Balanced scorecard perspectives: financial, customer, internal process, and learning and growth.

Stakeholder vs shareholder orientation: stakeholder theory considers all affected parties; shareholder theory prioritises owner value.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring.

IT general controls cover access management, change management, backup and recovery, and IT operations.

Application controls include input validation, processing checks, and output reconciliation.

Segregation of duties prevents one person from initiating, authorising, recording, and reconciling a transaction.

Data analytics types: descriptive (what happened), diagnostic (why), predictive (what will happen), prescriptive (what to do).

Big data characteristics: volume, velocity, variety, veracity, and value.

Data integrity controls: completeness, accuracy, validity, uniqueness, and consistency checks.

Encryption protects confidentiality in transit and at rest; hashing verifies integrity but is not reversible.

Audit trails and logging provide evidence of who accessed or changed data and when.